Deutsche Telekom profit boosted by T-Mobile

FriedrichGeiger

FRANKFURT-- Deutsche Telekom AG said Thursday its net profit rose in the second quarter, boosted by results at T-Mobile US Inc., currently the object of takeover interest.

Germany's largest telecommunications group reported a 34% increase in net profit to EUR711 million ($951.5 million) from EUR530 million. Revenue slipped 0.3% to EUR15.11 billion.

Earnings were boosted by T-Mobile, its U.S. unit, which turned profitable in the second quarter after posting a loss a year earlier. A spectrum swap with Verizon Communications Inc. contributed one-time income of around EUR400 million before tax to Deutsche Telekom's earnings.

A Deutsche Telekom spokesman said in the early morning Chief Executive Timotheus Hoettges would comment later in the day on "speculation" around T-Mobile US, in which the German group has a 67% stake.

T-Mobile has long been expected to strike a deal with Sprint Corp. that would improve the companies' competitiveness, but Sprint has decided not to pursue a merger, The Wall Street Journal reported this week. Shortly before that decision, France's Iliad SA offered to buy a majority stake in T-Mobile but was denied access to the company's books, according to people familiar with the matter. Dish Network Corp. Chairman Charlie Ergen said Wednesday his group is also interested in acquiring in T-Mobile US.

Proceeds from a sale of the U.S. unit would be welcome for Deutsche Telekom, which faces billions of euros in expenses to upgrade its domestic network and fend off competition from Vodafone Group PLC and Liberty Global PLC, which operate television cable networks in Germany.

Commenting on the past quarter, Deutsche Telekom said customer losses at its domestic fixed-network business slowed down, helped by network upgrades, while the German mobile business was largely stable. In the rest of Europe, revenue declined, but cost cuts helped earnings. The business with corporate customers was hindered by a restructuring.

For the full year, the company confirmed its forecast and continues to predict adjusted earnings before interest, tax, depreciation and amortization of around EUR17.6 billion.

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